FAQs
Equity release is a financial product that allows homeowners aged 55 and older to access the equity tied up in their property. It typically involves taking out a loan. The loan is repaid, along with accrued interest, from the proceeds of the property sale when the homeowner passes away or moves into long-term care.
Eligibility for equity release generally requires the homeowner to be aged 55 or over and own a property in the UK that meets specific valuation criteria. The property should be in good condition and freehold or leasehold with a remaining lease term of at least 75 years. Additionally, lenders may consider factors such as the property’s location and the homeowner’s health and financial status.
Equity release can provide retirees with a tax-free lump sum with or without a drawdown facility, allowing them to supplement their retirement income, fund home renovations, pay off debts, or support family members financially. It enables homeowners to access the value of their property without having to sell or downsize, providing financial flexibility and peace of mind in retirement.
While equity release can offer financial freedom, it is essential to consider the potential risks. These may include:
- Accrued interest leading to a reduction in inheritance left for beneficiaries.
- Possible impact on means-tested benefits or entitlements.
- Long-term effects on property value.
- Early repayment charges or penalties for repaying the loan ahead of schedule.
Deciding whether equity release is suitable for your circumstances requires careful consideration and professional advice. Before proceeding, it is advisable to:
- Seek independent financial advice from a qualified adviser specialising in equity release.
- Discuss your financial goals, needs, and concerns with your family members or beneficiaries.
- Compare different equity release products, including their features, costs, and repayment options.
- Consider alternative options such as downsizing, accessing other sources of income, or seeking government benefits or grants.